WARNING: Mobile phone charges

Last month I flew out on a seven day visit to Japan, Hong Kong and Thailand as part of my frequent business travels. Being previously aware about the outrageous mobile phone charges telecommunication companies bill, I decided to switch off my data roaming…. however the only hiccup was that I didn’t, I simply forgot and arriving back in Australia to my shock and astonishment I received a whopping $4200 bill. More on that in a moment.

The following media article highlights the “hidden” tricks the telcos use to rob consumers blind. The truth is that it has nothing to do with the spin they promote as noted in the article, but more with their out of control greed that unfortunately is left unchecked and therefore in most cases allows them to get away with it.

The good news from my sorry saga is that after 2 hours of negotiations, the telco that was the butt of my complaint, decided to forgive the $4200 debt and was happy to settle for $500. I decided to say yes to settlement and now share this unfortunate episode so others don’t fall in their trap.

How mobile phone users are being massively ripped off

By Alan Finkel

My wife and I are overseas, trying to navigate our way through the streets of London. But we haven’t dared to use Google maps on our iPhones. We know that if we do we will generate massive phone bills. Without our phone apps we are like birds with clipped wings.

The pricing practices that govern mobile phone voice and data charges during overseas travel are unprecedented in the massive penalty they apply to travellers.

It’s worse than you ever imagined. The international data rates from our major telephone companies are about 1.5¢ per kilobyte.

This sounds cheap but there is a gotcha, in that normal domestic data rates are quoted in gigabytes, not kilobytes.

As it happens, one gigabyte is 1 million times more data than one kilobyte. So if you convert the quoted international rate of 1.5 cents per kilobyte to the normal gigabyte units, the price comes out to $15,000 per gigabyte.

This is a stunning, 1500-times multiplier on the usual domestic rate of $10 per gigabyte. A week of regular email with attachments and using Google maps can easily gobble up half a gigabyte. An unwitting friend of mine recently returned home to find a bill of more than $7000 waiting for him. Even more shocking, if you were travelling and you used your 3G-enabled laptop computer to download a two-gigabyte movie your ticket would be a staggering $30,000.

This extreme pricing results from an undeclared agreement between telephone companies. To illustrate, consider that each Australian mobile phone company does a deal with its counterpart in, for example, France. Under this deal, when one of the Australian company’s customers uses her phone in France, the French phone company charges the Australian company an exorbitant rate per gigabyte, vastly more than the actual cost for delivering the service. The Australian phone company doesn’t complain. Instead, it passes the charge through to its customer.

The customer knows the price is outrageous but whom can she blame? The Australian company argues that it is merely passing on the price it is charged by the French company.

So what’s in it for the Australian company? Well, there is a reciprocal deal under which the Australian company applies an excessively large charge per gigabyte to French customers roaming in Australia. This time round, the Australian company makes an excessive profit.

These reciprocal agreements are legal, but they are to the great disadvantage of customers.

Is this a case of caveat emptor? In truth, the mobile phone companies dutifully publish their international roaming rates on their websites. But the information provided by the mobile phone companies is quoted in kilobytes, numerically correct but misleading customers into a gross under-appreciation of the actual costs.

To help mobile phone users understand the true costs, mobile phone companies should be legally required to always quote domestic and international data rates using the same units, such as gigabytes, so that at least their customers can make a meaningful comparison.

What can be done in the long term? After an inquiry in 2005 the ACCC determined that the wholesale charges set by overseas mobile network companies were beyond the ACCC’s jurisdiction.

To fix this impasse the Australian government should introduce legislation to outlaw excessive roaming price agreements between mobile phone companies.

There will be excuses that it is too difficult to introduce such legislation because the agreements between mobile phone companies span multiple countries. However, there are precedents for introducing multinational legislation, such as in the field of taxation law.

Let’s hope that there is action soon to restrict phone companies to applying a fair charge for the provision of international data and voice services.

That way, next time you travel in London or anywhere else you will be able to read your email while sitting at a train station, then use your phone to navigate to your next destination.

This article expresses the personal opinion of Alan Finkel. He is chancellor of Monash University and president of the Australian Academy of Technological Sciences and Engineering.